The precious metals markets have tremendous potential for investors. But they are also wrapped up in great mystery, deliberately so. Gold is the worst understood financial market. Most official data about gold is actually disinformation. Years ago, the International Monetary Fund, the leading compiler of official gold reserve data, allowed its member nations to count gold they had leased, gold that had left their vaults, as if it was still in their vaults. The effect of this accounting fraud was to deceive the gold market into thinking that central banks had much more gold left to bomb the market with than they really did. But that's only the start of the false data. In April 2009 China caused a bit of a sensation by announcing that its gold reserves had increased by 76%, from 600 tonnes to 1,054 tonnes. For the previous six years China had been reporting to the IMF only 600 tonnes. Had China acquired those 454 new tonnes only in the last year? Very unlikely. Experts now believe that China acquired those 454 new tonnes over at least several years, largely by purchasing the production of China's own fast-growing gold mining industry. So for as many as six years the official gold reserve data about China was way off. This June the World Gold Council reported that Saudi Arabia's gold reserves had increased by 126%, from 143 to 323 tonnes, just since 2008. That the world's oil-exporting superpower had made such a new commitment to gold in its foreign exchange reserves also caused a brief sensation. But a few weeks later the governor of the Saudi Arabia Monetary Authority, Muhammad al Jasser, insisted to news reporters in Kuwait that Saudi Arabia had not purchased the gold cited in the June reports but rather had that extra gold all along in what he called "other accounts" -- that is, in accounts not reported officially, just as the true status of China's gold accounts was not reported officially for six years, if the true status is being reported even now. Some analysts think that China and Saudi Arabia have accumulated far more gold than they're reporting and are accumulating still more gold surreptitiously, China to hedge its dollar foreign exchange surplus, Saudi Arabia to hedge both its dollar surplus and the depletion of its oil reserves. China and Saudi Arabia can't acknowledge this accumulation lest they spook the currency markets and devalue their dollar surpluses before those surpluses are fully hedged. In September 2009, in the course of seeking access to gold records from the Federal Reserve and then suing the Fed in U.S. District Court for the District of Columbia, a written admission was obtained from the Fed, signed by Fed Board of Governors member Kevin M. Warsh, a former member of the President's Working Group on Financial Markets. Warsh wrote that the Fed has secret gold swap arrangements with foreign banks and that these arrangements must be kept secret. So has gold from the U.S. reserve been swapped? Does the United States really have 8,200 tonnes of gold in its reserve, as it long has claimed to have? Fed Governor Warsh didn't quite say that U.S. gold had been swapped, only that the Fed has gold swap arrangements. But the U.S. gold reserve hasn't been audited in more than half a century, and the last audit wasn't really complete. Then there are the major gold and silver exchange-traded funds, (ETFs), which were established in the last few years supposedly to help ordinary investors invest conveniently in gold and silver. How much metal do the ETFs have? The major ETFs won't disclose exactly where their metal is, and indeed their prospectuses say it's OK for the ETFs not even to know where their metal is kept among custodians and sub-custodians. And the custodians for the major gold and silver ETFs are, perhaps not so coincidentally, also the two major international banks that report having the biggest short positions in gold and silver, short positions that give these banks and metal custodians a powerful interest in suppressing the price of the assets they supposedly are holding for investors who want those assets to rise in value. How much gold do the major gold and silver ETFs really have in their vaults? How much of it is encumbered in some way? ETF investors themselves will never be permitted to know. The biggest so-called "physical" gold market in the world is the one run by the London Bullion Market Association. The LBMA publishes statistics on how much gold and silver are traded by its members. But these statistics show spectacular volumes, more metal than could possibly exist. Of course much of this metal could be sold and resold back and forth many times every day. But an expert in that market, Jeffrey Christian of the CPM Group, acknowledged at the March 25 hearing of the U.S. Commodity Futures Trading Commission, as he had acknowledged in an explanatory report published in 2000, that the London bullion market is actually a fractional-reserve gold banking system built on the presumption that most gold buyers will never take delivery of their metal but rather leave it on deposit with the LBMA members from whom they bought it. Estimates show that the great majority of gold sold by LBMA members doesn't exist; that most gold sales by LBMA members are highly leveraged. How leveraged? How much gold is due from LBMA members that doesn't really exist? The LBMA doesn't report that. Like the Fed's gold swap arrangements, the world mustn't be permitted to know. The consequences might be catastrophic for the banking interests that run the world. For then the world might understand why even at its recent price above $1,300 per ounce gold has not come close to keeping up with the inflation, the currency debasement, of the last few decades, why gold has not fulfilled its function of hedging against inflation. That is, gold's enemies figured out how to increase its supply by vast amounts without going through the trouble of digging it out of the ground. They invented "paper gold"; gold that doesn't exist but that many buyers accepted, never suspecting that major financial institutions might deceive or defraud them. ETFs seem to resemble currency don't they!* * *The misunderstanding of the gold market continues with the awful journalism about it.The falsity of the data about the gold market practically screams at financial journalists:-- There's the omission by official gold reserve reports of leased and swapped gold.-- There are the sudden huge changes in official gold reserve totals.-- There are the deception and conflicts of interest built into ETF prospectuses.The valid documentation about the gold market also practically screams at financial journalists:-- There are the huge and disproportionate gold, silver, and interest rate derivative positions built up at just three international banks, positions that never could be undertaken without the express or implicit underwriting of the U.S. government.-- And there are the dozens of official records demonstrating the plans and desire of the U.S. government to suppress and control the price of gold.But financial journalists just don't ask about these things. After all, who are the major advertisers in the financial news media? The market manipulators and governments themselves.* * *Maybe this journalistic negligence will change some because of the remarkable event recently in Washington. A member of the U.S. Commodity Futures Trading Commission, Bart Chilton made a statement that had a noticeable effect on those markets. At a CFTC hearing Chilton issued a formal statement urging his commission to answer to the public for the commission's seemingly interminable investigation of the silver market. Chilton added: "I believe that there have been repeated attempts to influence prices in the silver markets. There have been fraudulent efforts to persuade and deviously control that price. Based on what I have been told by members of the public and reviewed in publicly available documents, I believe violations to the Commodity Exchange Act have taken place in silver markets and that any such violation of the law in this regard should be prosecuted." Within hours Chilton's statement had become international news. Of course that doesn't mean that financial news organizations will press the precious metals market manipulation story vigorously now. But the story just became a lot harder to ignore. Indeed, just a few hours later a lawsuit complaining of silver price manipulation by J.P. Morgan Chase & Co. and HSBC was filed in U.S. District Court for the Southern District of New York. Why is gold, along with silver, kept such a mystery? It's because the two precious metals are not only money but, from the point of view of free individuals, the best sort of money, less susceptible to what governments see as the most desirable quality of money; the susceptibility to control by government and particularly its susceptibility to devaluation. You can print or otherwise issue gold and silver derivatives to infinity, but not the metals themselves. Gold particularly is kept such a mystery because it is the key to unlocking the currency markets, which long have been the most efficient mechanisms of imperialism. Since the United States now issues the reserve currency for the world, the dollar, the United States now more or less occupies most countries economically, even those countries that have their own currencies, since even those countries hold most of their foreign exchange reserves in dollars. Free-trading and widely accessible gold always has been and always will be a threat to the rigging of the currency markets, always will be the escape from overbearing government generally and from any overbearing government in particular. That is why so many U.S. government records compiled over the years candidly discuss or advocate or describe controlling and suppressing the gold market. A declassified cable from the U.S. Embassy in Paris to the State Department in Washington, written in March 1968, even talks about the necessity for U.S. monetary officials to remain what the cable calls "the masters of gold." This is also why U.S. government agencies like the Federal Reserve are trying desperately to prevent other such documents from being disclosed. That is, gold is the secret knowledge of the financial universe and its true value relative to currencies is vastly greater than its nominal price today, since much of the gold that investors think they own doesn't exist. Russia, China, and other Asian countries have figured out that the dollar reserve system is the mechanism of their economic enslavement and have started to prepare their liberation by accumulating gold in a big way before gold is formally reinstated as the world reserve currency or as a big part of that new reserve currency. Now you're in on the secret too. Just make sure that whenever you buy precious metal, you're getting metal, not paper. Otherwise you'll just be sabotaging yourself.